Incentive pay to keep Newport-Mesa Unified official from retiring has topped $273,000

The Newport-Mesa Unified School District has paid $273,591 into a separate retirement account for its deputy superintendent and chief business official as an incentive to delay his retirement.

The fund for Paul Reed was created "in recognition of the board's desire that the deputy superintendent continue to serve the district past the optimal STRS retirement age of 62," Reed's contract states.

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Reed, 68, also will receive a pension from the state when he retires.

But the district's former director of human resources, John Caldecott, said the lack of specifics related to the retirement contributions raises red flags and questions about transparency. Information about the retirement fund was obtained by Caldecott after he filed a state public records request.

"There is no way the public would have known the dollar amount that is being contributed by the district to Paul Reed," Caldecott said. "The board is elected to be the eyes, ears and voice of the taxpayer. I don't think that happened in this case. They have been the voice of the administration."

District officials said the extra funds are merited because of Reed's skill set.

"Experienced professionals with strong business and education proficiencies, like Paul Reed, are difficult to come by," board President Dana Black said. "We value his knowledge, expertise and success in ensuring our continued fiscally responsible approach to providing a world-class education for our students."

Reed began working at Newport-Mesa in 2002 after spending 26 years in the Irvine Unified School District, where he got his start as a labor negotiator. As one of Newport-Mesa's top officials, Reed has guided the district through recession and cuts in education funding.

Caldecott, however, said Reed "does nothing for this compensation. This is a gift. It doesn't make sense to pay someone not to retire."

Reed declined to comment.

Reed is the only management employee who receives additional retirement money from the district, Newport-Mesa spokeswoman Annette Franco said.

The contributions were first approved by the board in 2009 and are transferred annually into an account at Reed's bank, Franco said.

At that time, the board offered to buy service credit from the California State Teachers' Retirement System, or CalSTRS, which would have, in essence, increased the number of years Reed has served in public education in the eyes of the state retirement agency. That number is used as part of a calculation to determine compensation after an employee retires, according to CalSTRS.

However, Reed asked the board, and it agreed, to purchase a tax-sheltered annuity of "like value" instead of the CalSTRS credit. A tax-sheltered annuity, also known as a 403(b) account, is similar to a 401(k) in that it enables employees to defer some of their salary in individual accounts. The deferred salary is generally not subject to federal or state income tax until it is distributed, according to the Internal Revenue Service.

It's not unheard of for public employees to receive retirement funds in the form of tax-sheltered annuities, said Michael Sicilia, media relations manager with CalSTRS.

"We wouldn't even know about it because it wouldn't have an impact on STRS credit," he said. "It's something that's negotiated in employee contracts."

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Reed's contract does not specify how the district calculates the amount to contribute to his retirement fund or the amount to be paid annually.

But this year, the board agreed to pay $40,414 into the fund, according to information provided by Newport-Mesa Unified.

Reed will earn a base salary of $259,143 this year. He also receives annual allowances of $7,800 for transportation and $1,200 for communications such as cellphones, according to his contract.

The board fired Caldecott in January 2015 shortly after he filed a lawsuit against the district to compel officials to release internal emails and other documents related to his claim that Supt. Fred Navarro had created a hostile work environment for employees and retaliated against Caldecott for questioning salary reports to CalSTRS.

In December, a three-judge panel of the state 4th District Court of Appeal ruled that the school district must release dozens of documents related to Caldecott's allegations against Navarro. The district plans to release the documents after a final review by an Orange County Superior Court judge.